Planning the beginning of your happy ending can be expensive. In fact, according to information issued by The Knot’s jewelry studio in 2019, the average American couple spends up to $5,900 on an engagement ring. And yes, it is true that many choose to save to pay for this beautiful and significant piece of jewelry in cash, but there is also the option of financing the purchase so that they do not have to wait so long and perhaps even take advantage of the discounts in the industry. So at this point the question is not if you should take out a loan to buy an engagement ring, but what alternatives do you have to do so.
So, if you are planning to propose to your better half, this article may interest you. We’ve rounded up a number of financing options ranging from 0% APR credit cards to traditional loans for you to compare them with each other.
- 1 Should I take out a loan to buy an engagement ring?
- 1.1 Personal loans
- 1.2 Purchase installment loans
- 1.3 Credit cards
- 2 How to choose only one option to finance the purchase of the engagement ring?
- 3 How to determine if you should take out a loan to buy an engagement ring?
Should I take out a loan to buy an engagement ring?
Maybe yes. And it is that, asking for a loan to finance an engagement ring could be a good option, at least depending on your current financial situation and your preferences. For that reason, we leave you three options at your disposal that could give you some ideas. Let’s see them!
Personal loans are well known because they are a credit option in installments. The duration of this payment term can be months or years.. If you qualify for a personal loan, you will receive a lump sum of money that you can use to make a big purchase, such as your partner’s engagement ring.
Once you have compared several options and selected the lender of your choice, you can formally complete the application. Just keep one thing in mind: prequalification is not a guarantee that you will be granted the loan. Nor does it assure you that the terms offered in the first document remain intact.
The details, as always, will be determined once the bank evaluates your formal application and, of course, checks your credit score.
Advantages of requesting a personal loan to buy an engagement ring
- Many personal loans do not require liquid collateral or pledgeso you can keep your savings account, term certificates and even your vehicle out of the equation
- According to data provided by the Federal Reserve, the average interest rates on personal loans tend to be lower than those applied to credit cardsthis assuming that it is not a card with a 0% introductory APR.
- Some lenders offer fixed interest ratesso if you qualify, you can keep your monthly payments unchanged over time.
Disadvantages of applying for a personal loan to buy an engagement ring
- The interest rate on a personal loan may be higher than on a secured loansince the risk that the lender runs is greater and it does not have any property or asset that ensures the collection of the debt in case of default.
- If you qualify with bad credit, the bank may offer you a personal loan with a high interest rate.
- Personal loans may be subject to certain fees, such as the commission charged by the bank for processing the request, for example. This could negatively affect the total cost of the loan.
Purchase installment loans
Better known as buy-now, pay-later. Several lenders are switching to this very popular move, such as affirm, Klarna Y AfterPay. Through them, you will be able to buy in some participating stores and request an installment loan to pay the amount of the purchase over time.
If you’ve found an engagement ring that you love and you don’t want to pass up the jewelry offer, you may want to check this out with a magnifying glass. At the end of the day, it could be just as good as any other financing method.
Tip: Before opting for any of the platforms that offer buy-now, pay-later loans; You should ask the store you like if they work with this type of financing.
Advantages of requesting a buy-now, pay-later loan to buy an engagement ring
- If you already know which engagement ring you like, you can apply for financing directly in store or online.
- Some buy now, pay later lenders offer a 0% APR if you meet certain requirements. If this is your case, this could be a better option than paying for the ring with your credit card, right?
- Some companies, like Affirm, don’t focus as much on your credit score, since they evaluate other factors of your financial profile. Of course: remember that the mere fact of qualifying does not mean that it is an excellent idea to request the loan. Evaluate if you will be able to repay the money in the agreed payment schedule.
Disadvantages of requesting a buy-now, pay-later loan to buy an engagement ring
- The list of participating stores is limited. If the jewelry you like is not on this list, this may not be your best option.
- You could end up paying more than you think if you are late. Remember that these kinds of companies charge surcharges and fines for late payment.
- There is also the risk of end up with a loan subject to an APR as high as your credit card. Read the terms and conditions carefully before accepting.
There are several ways you can use your credit cards to pay for an engagement ring. One option is to use one you already have, but you may like the second alternative better. Why? Because it involves applying for a new credit card with a 0% introductory APR for purchases.
If you are thinking of using this card to buy only the engagement ring, you could request it even at the jewelry center. You may not know it, but some jewelers offer a low introductory rate, although it is not usually that 0% that everyone wants.
Advantages of using a credit card to buy an engagement ring
- Some credit card issuers offer an APR for initial purchases that is highly attractive, either because it is very low or because it is at 0% interest.
- You may be able to earn rewards for your purchase, whether in travel miles, cash rebates, etc. It all depends on the credit card you use.
- Some jewelers too offer good financing options that you won’t want to miss.
Disadvantages of using a credit card to buy an engagement ring
- offers of a 0% introductory APR usually last for Limited time. If you wait too long to buy the ring, you may not be able to enjoy this benefit.
- If you do not qualify for a 0% APR credit card or are unable to pay the full balance of the purchase before the promotional period expires, then you could end up paying a high interest rate.
- You may need to do the down payment if you opt for the option of financing the purchase directly at the jewelery centre.
How to choose only one option to finance the purchase of the engagement ring?
Now that we have seen all the options, it is time to discover how to choose the best of them to finance the purchase of the engagement ring. In general, you should take these factors into account in the comparisons to select one of the many alternatives:
- Interest rate. If you can qualify for a 0% APR financing option, congratulations! Possibly this is the best option. However, if this is not the case, it is possible to opt for a personal loan of traditional banking.
- Rates. Fees matter too. Make sure you read the fine print of the offer before accepting a loan or a new credit card.. If you are considering requesting a personal loan at the bank, find out what the fees and commissions are and if they charge any amount for advance payment, application, among others.
- Total quantity. This is perhaps one of the first things you should evaluate. Consider that this amount would include the price of the ring, the interest generated by the financing, the sum of bank fees, fees, commissions, etc.. Determine what the total amount of the loan is and compare it with the others to know which is the cheapest alternative.
- Financial situation. Do not forget that that 0% APR and the condition of getting rid of some of the fees associated with financing will depend on your current financial situation. Before taking advantage of any of these alternatives, you need to assess whether you are able to make the purchase payments comfortably and without delay. Otherwise, you would fall into default and your credit score will suffer.
How to determine if you should take out a loan to buy an engagement ring?
If you’re ready to take the next step (proposing to your partner) but can’t buy the engagement ring in cash, ask yourself a few questions before financing the purchase:
- Can I qualify for a 0% APR promotional credit card for introductory purchases?
- If so, can I pay the full purchase amount before the introductory rate expires?
- Is my credit good enough to qualify for a traditional personal loan?
- If I qualify for a personal loan or a good credit card, are there any additional fees that raise the cost of financing?
- Will I be able to comfortably pay the monthly payments without making sacrifices and without falling behind?
Answering these questions will help you make a good decision. Think that only then will you know what type of financing suits you according to your credit score, budget and lifestyle.